Introduction

The Dairy Business Analysis Project (DBAP) was initiated in 1996 by the University of Florida in an effort to measure and document the financial performance of Florida dairy farms using standardized accounting measures. The University of Georgia has been a formal collaborator since 1998. The DBAP website is http://dairy.ifas.ufl.edu/dbap.

Figure 6.

Financial data for the year 2008 were collected from 14 participating dairy farms and screened for completeness and validity. Each dairy farm then received a benchmark report detailing its financial results compared to the average results for the other participants and the six dairy farms with the highest net farm income per cwt. This benchmark report is discussed with the participants to identify challenges and opportunities for improvement.

This publication is a summary of the financial performance of the 14 dairy farms that participated in 2008. It is intended for general use by dairy farmers, the allied industry, government, and educational professionals.

Data Collection and Accounting Methods

Dairy producers in Florida and Georgia were given the opportunity to participate in DBAP. Participants were not a random sample of all dairy farms in the two states. The financial performance results in this publication are therefore not necessarily representative of the average results of all dairy farms in Florida and Georgia.

Most of the data were collected by Extension agents when visiting dairy farms using a standardized data collection spreadsheet. Occasionally, data were sent in by the dairy producers. The financial data were either entered into the spreadsheet on the farm or mailed in on paper copies of the spreadsheet.

The accounting methods followed the recommendations made by the Farm Financial Standards Council (Farm Financial Standards Council. 1997. Financial Guidelines for Agricultural Producers). All revenues and expenses were accrual adjusted. Cash receipts and expenses were therefore adjusted for changes in inventory, prepaid expenses, accounts payable, and accounts receivable. Depreciation data were often taken from tax records. Asset valuation was based on market values if available, but the changes from January 1 to December 31 were kept small. Unpaid management was valued at $50,000 per farm. Gain or loss on sale of purchased livestock resulted when livestock depreciation did not completely account for the gain or loss in the value of the purchased livestock during 2008. Appreciation resulted when machinery and building depreciation did not completely account for the gain or loss in the value of these capital assets during 2008. The bottom line of each dairy farm is its net farm income. Net farm income is the return to the owner and unpaid family members for their labor, management, and equity in the dairy farm. It is the total income available for owner's salary, new investments, taxes, and paying off principal.

All submitted data were carefully scrutinized and checked for completeness. The cash flow statement reconciles the net cash flow resulting from the reported operating, investing, and financing activities with the reported available cash on the January 1 and December 31 balance sheets. The equity statement reconciles the changes in equity through reported retained capital and valuation with the calculated equity on the balance sheets. The reconciliation attempts typically result in unresolved imbalances. Both cash flow imbalance and equity imbalance had to be less than 10% to be included in the summary results reported here.

All results in this publication are the simple averages of the statistics of the dairy farms with valid data. Every dairy farm has equal weight. For example, assume a 100-cow herd produced 1,700,000 lbs of milk (17,000 lbs/cow) and a 1000-cow herd produced 19,000,000 lbs of milk (19,000 lbs/cow). Average milk yield per farm is (19,000,000 + 1,700,000) / 2 = 10,350,000 lbs, and average herd size is (100 + 1000) / 2 = 550 cows. The weighted average milk yield per cow is 10,350,000 / 550 = 18,818 lbs/cow. The simple average milk yield per cow is (17,000 + 19,000) / 2 = 18,000 lbs/cow.

Some definitions and calculation rules are as follows:

Asset turnover ratio = total revenues / average assets

Assets = value of assets on the balance sheet

Average assets = average of value of assets on January 1 and December 31

Average equity = average of value of equity on January 1 and December 31

Results

Summary results for 2008 are presented in Tables 1.1 to 4.4 and Figures 1 to 5. Each category in Tables 2.1 to 4.4 is divided into three levels based on the lowest 5, middle 4, and highest 5 farms for that category. Therefore, the lowest 5 farms in one category may be different from the lowest 5 farms in another category. Revenues and expenses may not add up due to rounding.

In brief, 14 dairy farms were included in the summary results. Of these, 11 were located in Florida and 3 in Georgia. The average herd size of the participating dairies was 1584 cows and 834 heifers with 17,588 lbs. milk sold per cow. The average culling rate was 33%. The average milk income was $23.16. Average total revenues were $25.48 per cwt. milk sold. Total expenses averaged $24.54 per cwt. sold. The largest items were purchased feed, $11.21, and personnel costs, $3.92 per cwt. sold. Net farm income from operations averaged $0.94 per cwt. sold. Net farm income per cwt. was $0.95. These results indicate a marked decrease in average profitability compared to 2007.

DBAP 2008 Summary—Business size and production efficiency by average number of cows and milk per cow.

Average number of cows

Milk yield (lbs/cow/year)

Category

< 790

790–

2000

> 2000

< 16,000

16,000-

19,000

> 19,000

Number of farms

5

4

5

5

4

5

Business Size:

Average number of cows

392

1,476

2,862

1,923

1,276

1,491

Average number of heifers

150

1,079

1,323

473

940

1,111

Milk sold (million lbs)

6.37

26.21

49.93

28.33

21.81

31.48

FTE workers

8

23

36

20

21

26

Acres of pasture + cultivated land

376

810

1,245

1,018

723

672

Production Efficiency:

Milk sold (lbs/cow/year)

16,541

18,501

17,905

13,948

17,342

21,425

Cows/FTE worker

41

67

86

76

65

52

Milk sold (million lbs)/FTE worker

0.67

1.22

1.48

1.10

1.13

1.12

Cull rate

41%

25%

31%

35%

34%

29%

Table 2.2.

DBAP 2008 Summary—Revenues and expenses by average number of cows and milk per cow ($/cwt).

Average number of cows

Milk yield (lbs/cow/year)

Category

< 790

790-

2000

> 2000

< 16,000

16,000-

19,000

> 19,000

Number of farms

5

4

5

5

4

5

Revenues:

Milk sold

21.50

23.94

24.18

22.30

24.30

23.09

Raised, leased cow sales

(0.64)

1.29

0.87

0.25

0.30

0.76

Heifer sales

0.74

0.33

0.28

0.89

0.01

0.40

Gain on purchased livestock

Sales

0.51

(0.16)

0.41

0.44

0.01

0.35

Other revenues

1.76

0.37

1.11

0.48

0.63

2.18

Total revenues

23.89

25.77

26.85

24.37

25.25

26.79

Expenses:

Personnel

4.90

3.64

3.16

3.95

3.86

3.94

Purchased feed

12.02

9.85

11.50

12.24

10.93

10.42

Crops

0.65

1.13

0.20

0.47

0.74

0.69

Machinery

0.97

2.14

0.73

1.14

1.31

1.22

Livestock

1.89

2.04

1.68

2.04

2.04

1.54

Milk marketing

1.36

0.98

1.41

1.33

1.30

1.19

Buildings and land

0.82

0.48

0.76

0.48

0.43

1.14

Interest

0.29

0.57

0.46

0.32

0.51

0.48

Depreciation:

Livestock

1.27

0.22

1.62

1.28

1.73

0.41

Machinery

0.44

0.90

0.47

0.52

0.41

0.78

Buildings

0.23

0.75

0.36

0.42

0.65

0.25

Other expenses

1.56

1.21

0.82

1.13

1.22

1.25

Total expenses

26.39

23.92

23.18

25.32

25.12

23.30

Net farm income from operations

(2.51)

1.85

3.67

(0.95)

0.13

3.49

Gain on sale of capital assets

0.03

(0.00)

0.00

0.00

0.00

0.03

Net farm income

(2.48)

1.84

3.67

(0.95)

0.13

3.52

Table 2.3.

DBAP 2008 Summary—Financial performance by average number of cows and milk per cow.

Average number of cows

Milk yield (lbs/cow/year)

Category

< 790

790-

2000

> 2000

< 16,000

16,000-

19,000

> 19,000

Number of farms

Liquidity:

5

4

5

5

4

5

Current ratio

0.29

57.85

4.91

0.86

4.86

46.73

Working capital ($)

(120,837)

8,441

1,386,260

154,072

369,615

822,413

Solvency:

Debt to asset ratio

0.23

0.27

0.27

0.21

0.30

0.26

Equity to asset ratio

0.77

0.73

0.73

0.79

0.70

0.74

Debt to equity ratio

0.54

0.38

0.47

0.33

0.70

0.43

Profitability:

Rate of return on assets

(0.06)

0.07

0.15

(0.01)

0.02

0.14

Rate of return on equity

(0.09)

0.06

0.26

(0.01)

(0.01)

0.24

Operating profit margin ratio

(0.18)

0.09

0.15

(0.10)

0.01

0.13

Financial efficiency:

Asset turnover rate

0.50

0.87

0.90

0.63

0.80

0.83

Operating expense ratio

1.02

0.83

0.75

0.95

0.86

0.79

Depreciation expense ratio

0.08

0.07

0.09

0.08

0.11

0.06

Interest expense ratio

0.01

0.02

0.02

0.01

0.02

0.02

NFIFO ratio1

(0.11)

0.07

0.14

(0.05)

0.00

0.13

Repayment capacity:

Cash flow coverage ratio

(0.08)

59.81

2.70

0.43

2.86

47.74

Term debt coverage ratio2

(0.42)

1.50

9.74

6.57

2.42

2.02

Capital replacement margin3 ($)

4,934

376,220

1,115,304

241,544

562,731

729,485

1Net farm income from operations ratio

2Term debt and capital lease coverage ratio

3Capital replacement and term debt repayment margin

Table 2.4.

DBAP 2008 Summary—Balance sheet by average number of cows and milk per cow ($/cow).

Average number of cows

Milk yield (lbs/cow/year)

Category

< 790

790-

2000

> 2000

< 16,000

16,000-

19,000

> 19,000

Number of farms

Balance sheet (January 1):

5

4

5

5

4

5

Current assets

352

442

1,171

380

278

476

Total assets

10,761

5,824

6,097

7,164

5,665

7,633

Current liabilities

283

387

916

528

683

704

Total liabilities

1,046

1,399

1,835

1,631

1,799

1,684

Equity

9,715

4,426

4,262

5,534

3,866

5,949

Balance sheet (December 31):

Current assets

232

434

1,171

663

431

1,127

Total assets

10,804

5,633

5,876

7,185

5,854

9,059

Current liabilities

428

287

648

447

541

475

Total liabilities

1,171

1,371

1,438

1,592

1,640

2,054

Equity

9,632

4,261

4,438

5,593

4,215

7,005

Table 3.1.

DBAP 2008 Summary—Business size and production efficiency by net farm income per cwt and rate of return on assets.

Net farm income ($/cwt)

Rate of return on assets (%)

Category

< $0.50

$0.50–$2.00

> $2.00

< 2.0%

2.0%–6.0%

> 6.0%

Number of farms

5

4

5

5

4

5

Business Size:

Average number of cows

703

1,441

2,579

630

1,682

2,460

Average number of heifers

346

1,286

961

363

1,101

1,092

Milk sold (million lbs)

10.50

25.47

46.39

9.25

27.29

46.18

FTE workers

13

25

30

12

24

31

Acres of pasture + cultivated land

424

1,006

1,040

414

1,069

1,000

Production Efficiency:

Milk sold (lbs/cow/year)

15,009

18,627

19,336

15,683

16,716

20,191

Cows/FTE worker

48

56

87

42

73

80

Milk sold (million lbs)/FTE worker

0.74

1.02

1.57

0.63

1.22

1.52

Cull rate

38%

31%

29%

40%

31%

27%

Table 3.2.

DBAP 2008 Summary—Revenues and expenses by net farm income per cwt and rate of return on assets ($/cwt).

Net farm income ($/cwt)

Rate of return on assets (%)

Category

< $0.50

$0.50–$2.00

> $2.00

< 2.0%

2.0%–6.0%

> 6.0%

Number of farms

Revenues:

5

4

5

5

4

5

Milk sold

21.92

24.28

23.49

21.72

24.41

23.59

Raised, leased cow sales

(0.24)

0.52

1.08

(0.18)

0.91

0.70

Heifer sales

0.67

0.28

0.40

0.84

(0.04)

0.48

Gain on purchased livestock

Sales

0.50

(0.02)

0.32

0.34

0.27

0.25

Other revenues

0.41

2.18

1.01

1.54

0.83

0.96

Total revenues

23.27

27.24

26.30

24.27

26.38

25.98

Expenses:

Personnel

4.24

4.94

2.78

5.26

3.74

2.72

Purchased feed

12.25

10.73

10.57

11.92

11.08

10.61

Crops

0.66

0.92

0.36

0.76

0.52

0.59

Machinery

1.23

1.76

0.77

1.38

1.31

0.98

Livestock

1.84

2.35

1.49

2.05

2.42

1.22

Milk marketing

1.31

1.10

1.36

1.26

1.35

1.21

Buildings and land

0.40

1.14

0.65

0.88

0.48

0.70

Interest

0.42

0.30

0.55

0.18

0.57

0.58

Depreciation:

Livestock

1.35

0.35

1.44

0.81

1.54

1.03

Machinery

0.49

0.47

0.77

0.45

0.47

0.80

Buildings

0.31

0.67

0.35

0.29

0.77

0.29

Other expenses

1.41

1.34

0.87

1.58

1.01

0.96

Total expenses

25.92

26.05

21.96

26.82

25.26

21.68

Net farm income from operations

(2.65)

1.19

4.34

(2.55)

1.12

4.30

Gain on sale of capital assets

0.00

0.04

(0.00)

0.03

0.00

(0.00)

Net farm income

(2.65)

1.23

4.34

(2.52)

1.12

4.30

Table 3.3.

DBAP 2008 Summary—Financial performance by net farm income per cwt and rate of return on assets.

Net farm income ($/cwt)

Rate of return on assets (%)

Category

< $0.50

$0.50–$2.00

> $2.00

< 2.0%

2.0%–6.0%

> 6.0%

Number of farms

Liquidity:

5

4

5

5

4

5

Current ratio

0.38

4.78

47.29

0.29

5.31

46.95

Working capital ($)

(186,891)

365,907

1,166,342

(132,712)

621,193

907,934

Solvency:

Debt to asset ratio

0.30

0.13

0.30

0.17

0.26

0.34

Equity to asset ratio

0.70

0.87

0.70

0.83

0.74

0.66

Debt to equity ratio

0.67

0.17

0.51

0.24

0.65

0.56

Profitability:

Rate of return on assets

(0.05)

0.04

0.17

(0.06)

0.04

0.17

Rate of return on equity

(0.09)

0.04

0.28

(0.08)

0.01

0.29

Operating profit margin ratio

(0.17)

0.03

0.18

(0.19)

0.05

0.18

Financial efficiency:

Asset turnover rate

0.66

0.76

0.83

0.53

0.80

0.94

Operating expense ratio

1.01

0.89

0.71

1.04

0.83

0.73

Depreciation expense ratio

0.09

0.06

0.10

0.06

0.11

0.08

Interest expense ratio

0.02

0.01

0.02

0.01

0.02

0.02

NFIFO ratio1

(0.12)

0.04

0.17

(0.11)

0.04

0.17

Repayment capacity:

Cash flow coverage ratio

0.05

2.59

48.34

(0.08)

3.13

48.03

Term debt coverage ratio2

(0.39)

1.46

9.74

(0.73)

8.02

4.84

Capital replacement margin3 ($)

(79,257)

628,305

997,827

(91,885)

770,626

896,598

1Net farm income from operations ratio

2Term debt and capital lease coverage ratio

3Capital replacement and term debt repayment margin

Table 3.4.

DBAP 2008 Summary—Balance sheet by net farm income per cwt and rate of return on assets ($/cow).

Net farm income ($/cwt)

Rate of return on assets (%)

Category

< $0.50

$0.50–$2.00

> $2.00

< 2.0%

2.0%–6.0%

> 6.0%

Number of farms

Balance sheet (January 1):

5

.

4

.

5

.

5

.

4

.

5

.

Current assets

308

457

1,203

231

613

1,155

Total assets

7,144

9,088

7,103

10,399

6,224

6,139

Current liabilities

346

185

1,015

179

350

1,049

Total liabilities

1,256

630

2,239

571

1,284

2,401

Equity

5,887

8,458

4,864

9,828

4,940

3,737

Balance sheet (December 31):

Current assets

180

449

1,211

181

511

1,161

Total assets

7,340

8,885

6,738

10,580

5,862

5,917

Current liabilities

483

230

639

317

362

699

Total liabilities

1,408

705

1,734

845

1,229

1,879

Equity

5,932

8,180

5,004

9,735

4,633

4,039

Table 4.1.

DBAP 2008 Summary—Business size and production efficiency by assets per cow and liabilities per cow.

Assets ($/cow)

Liabilities ($/cow)

Category

< $4,750

$4,750–

$8,000

> $8,000

< $1,000

$1,000–

$1,700

> $1,700

Number of farms

5

4

5

5

4

5

Business Size:

Average number of cows

1,429

2,717

832

1,063

1,475

2,192

Average number of heifers

1,104

1,154

309

759

954

814

Milk sold (million lbs)

24.68

47.96

14.21

16.33

24.91

41.00

FTE workers

24

32

12

18

22

27

Acres of pasture + cultivated land

715

1,194

599

947

670

785

Production Efficiency:

Milk sold (lbs/cow/year)

16,452

18,318

18,141

15,721

16,890

20,015

Cows/FTE worker

58

91

50

46

68

79

Milk sold (million lbs)/FTE worker

0.98

1.58

0.88

0.70

1.16

1.50

Cull rate

28%

26%

42%

39%

31%

28%

Table 4.2.

DBAP 2008 Summary—Revenues and expenses by assets per cow and liabilities per cow ($/cwt).

Assets ($/cow)

Liabilities ($/cow)

Category

< $4,750

$4,750–

$8,000

> $8,000

< $1,000

$1,000–

$1,700

> $1,700

Number of farms

5

4

5

5

4

5

Revenues:

Milk sold

22.52

24.07

23.06

22.22

24.11

23.33

Raised, leased cow sales

0.35

0.75

0.31

(0.10)

0.96

0.59

Heifer sales

0.10

0.48

0.81

0.75

0.48

0.16

Gain on purchased livestock

Sales

0.58

(0.37)

0.51

0.73

(0.42)

0.40

Other revenues

0.63

0.90

1.81

2.13

0.04

1.00

Total revenues

24.18

25.83

26.51

25.74

25.16

25.49

Expenses:

Personnel

3.54

3.03

5.00

5.17

3.95

2.63

Purchased feed

11.09

10.74

11.73

12.24

10.73

10.58

Crops

0.55

0.65

0.68

0.55

1.07

0.35

Machinery

1.30

1.39

1.00

1.06

1.97

0.77

Livestock

1.64

1.59

2.29

2.45

2.07

1.11

Milk marketing

1.28

1.05

1.43

1.47

0.94

1.33

Buildings and land

0.76

0.45

0.85

1.05

0.47

0.54

Interest

0.56

0.63

0.14

0.10

0.44

0.75

Depreciation:

Livestock

1.19

0.86

1.19

0.80

0.88

1.56

Machinery

0.39

0.45

0.88

0.56

0.39

0.76

Buildings

0.14

0.85

0.37

0.33

0.79

0.23

Other expenses

1.11

0.92

1.51

1.44

1.21

0.94

Total expenses

23.56

22.60

27.07

27.22

24.92

21.55

Net farm income from operations

0.62

3.23

(0.56)

(1.48)

0.24

3.93

Gain on sale of capital assets

0.00

0.00

0.03

0.03

(0.00)

(0.00)

Net farm income

0.62

3.23

(0.53)

(1.45)

0.24

3.93

Table 4.3.

DBAP 2008 Summary—Financial performance by assets per cow and liabilities per cow.

Assets ($/cow)

Liabilities ($/cow)

Category

< $4,750

$4,750–

$8,000

> $8,000

< $1,000

$1,000–

$1,700

> $1,700

Number of farms

Liquidity:

5

4

5

5

4

5

Current ratio

4.02

1.13

46.56

4.14

0.53

46.92

Working capital ($)

293,611

795,782

341,940

533,662

(259,431)

946,060

Solvency:

Debt to asset ratio

0.36

0.32

0.09

0.06

0.27

0.43

Equity to asset ratio

0.64

0.68

0.91

0.94

0.73

0.57

Debt to equity ratio

0.81

0.50

0.11

0.08

0.39

0.93

Profitability:

Rate of return on assets

0.06

0.12

(0.01)

(0.04)

0.03

0.17

Rate of return on equity

0.10

0.16

(0.00)

(0.05)

0.01

0.27

Operating profit margin ratio

0.02

0.14

(0.09)

(0.15)

0.02

0.17

Financial efficiency:

Asset turnover rate

1.04

0.82

0.40

0.51

0.80

0.95

Operating expense ratio

0.90

0.77

0.92

1.01

0.89

0.72

Depreciation expense ratio

0.07

0.09

0.09

0.06

0.08

0.10

Interest expense ratio

0.02

0.02

0.01

0.00

0.02

0.03

NFIFO ratio1

0.01

0.12

(0.02)

(0.07)

0.01

0.15

Repayment capacity:

Cash flow coverage ratio

2.06

1.16

47.47

1.62

0.96

48.07

Term debt coverage ratio2

(0.51)

6.01

6.22

3.72

2.59

4.73

Capital replacement margin3 ($)

623,996

558,611

350,329

388,463

277,350

810,871

1Net farm income from operations ratio

2Term debt and capital lease coverage ratio

3Capital replacement and term debt repayment margin

Table 4.4.

DBAP 2008 Summary—Balance sheet by assets per cow and liabilities per cow ($/cow).

Assets ($/cow)

Liabilities ($/cow)

Category

< $4,750

$4,750–

$8,000

> $8,000

< $1,000

$1,000–

$1,700

> $1,700

Number of farms

Balance sheet (January 1):

5

4

5

5

4

5

Current assets

581

1,030

471

431

255

1,241

Total assets

3,861

5,757

13,051

10,358

6,377

6,057

Current liabilities

532

979

193

170

286

1,110

Total liabilities

1,522

2,106

793

248

1,185

2,804

Equity

2,339

3,651

12,258

10,111

5,192

3,254

Balance sheet (December 31):

Current assets

496

999

455

423

200

1,167

Total assets

3,689

5,740

12,905

10,732

5,959

5,688

Current liabilities

542

746

167

260

365

754

Total liabilities

1,333

1,886

865

323

1,472

2,206

Equity

2,356

3,855

12,040

10,409

4,487

3,481

Footnotes

1.

This document is AN249, one of a series of the Department of Animal Sciences, UF/IFAS Extension. Original publication date August 2010. Reviewed July 2013. Visit the EDIS website at http://edis.ifas.ufl.edu.

The Institute of Food and Agricultural Sciences (IFAS) is an Equal Opportunity Institution authorized to provide research, educational information and other services only to individuals and institutions that function with non-discrimination with respect to race, creed, color, religion, age, disability, sex, sexual orientation, marital status, national origin, political opinions or affiliations. For more information on obtaining other UF/IFAS Extension publications, contact your county's UF/IFAS Extension office.

U.S. Department of Agriculture, UF/IFAS Extension Service, University of Florida, IFAS, Florida A & M University Cooperative Extension Program, and Boards of County Commissioners Cooperating. Nick T. Place, dean for UF/IFAS Extension.